BUSINESS
Alliance business manager Gary Croxon outlines key tips for managing your setting’s budget and finances in the face of the cost-of-living crisis and funding changes
Gary Croxon is an Alliance business manager who supports on our CPD offerings, with a focus on the Alliance’s business support packages and budget toolkit.
In the current financial climate, we’re all looking at where and how we can save money – and the early years sector is no exception. Despite rising costs and years of government underfunding, providing high-quality education and care to young children remains absolutely vital.
Knowing your setting’s financial position and having a budget forecast is crucial, as it allows you to reflect on your income and expenditure so you can make any necessary changes.
Here are some tips and advice to help you build a realistic, sustainable budget:
Factor in – or estimate – what your new early entitlement funding rate will be:
To set a budget, you first need to know the hourly rate you’ll receive from your local authority (assuming that you offer early entitlement places).
Though local authorities aren’t required to confirm final rates for 2024-25 until the end of March 2024, it shouldn’t prevent you from putting together a budget. You could, for instance, create one assuming you’ll receive the same funding income as 2023. Alternatively, you could add on a realistic percentage increase. We do, however, recommend against predicting a significantly higher income compared to last year, as this puts you at risk of budgeting for a better income than you’re likely to get.
The government confirmed that the early years sector would see an extra increase in funding rates from the current early years entitlement offers this September 2023, which could potentially make budgeting more difficult – particularly if you don’t budget autumn term to spring term.
It is also important to note that, under current government proposals, some local authorities will see a decrease in the funding rate they receive for two-year-olds compared to their September 2023 rate.
The Alliance’s Budget Toolkit is incredibly useful for making such adjustments, as it allows an extra amount to be added part-way through the year. This function – alongside being able to set your forecast budget starting from any term – will allow you to work on further scenarios to help plan ahead.
Confirm what changes – if any – you will be making to fees:
Fee income is something you have more control over, which makes it easier to factor into your budgeting. With the ongoing cost-of-living crisis, you may be understandably reluctant to review and increase your fees. However, it’s important to consider a reasonable uplift that reflects any rising costs at your setting.
You may also want to base your fees on children’s ages: you may, for example, want to charge a higher rate for two-year-olds to reflect the tighter ratio requirements. Whatever you decide, though, if you are planning to increase your fees, it’s always important to give parents and carers as much notice as possible.
Knowing your setting’s financial budget and having a budget forecast is crucial
Ensure that you are adhering to legal wage and holiday pay requirements:
It’s vital to ensure that you are continuing to meet statutory wage obligations. This may sound simple enough, but it’s easier than you might think to accidentally pay your employees less than the legal minimum. Information – including advice on how to avoid and remedy this, as well as several useful examples – can be found in our Alliance webinar, recorded in partnership with HMRC.
If you’re an Alliance member with queries about legal pay requirements, don’t forget that you can take advantage of Law-Call, a 24/7 service offering expert advice on HR, employment, and legal matters.
Make sure you have a good understanding of your non-pay-related costs:
While wages and other salary costs make up the bulk of setting expenditure, there are, of course, a whole range of other costs associated with operating an early years setting.
These tend to fall into three categories:
The Alliance’s Business Blocks suite of resources supports early years settings and services in tackling financial pressures head-on, providing a range of comprehensive expert support to help providers identify and address any gaps in their business approach.
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